WASHINGTON—The Labor Department has officially killed a Bush administration rule that would have cleared the way for mutual fund companies to offer direct one-on-one investment advice through their affiliates to defined contribution plan participants.
“The department decided to withdraw the (Bush administration) rule based on public comments that raised sufficient doubts as to whether the conditions of the final rule and the class exemption associated with the rule could adequately protect the interests of plan participants and beneficiaries,” the department’s Employee Benefits Security Administration announced Thursday.The EBSA also said it planned to issue a new proposed regulation on investment advice.
Gloria Della, an EBSA spokeswoman, said it was unclear when the agency would publish a new proposal or adopt a new final regulation.
“We don’t have a specific time line set because it’s going through the regulatory process,” Ms. Della said.
The EBSA under the Obama administration is expected to create a more conservative investment advice regulation that ERISA attorneys said would focus more on the interests of plan participants than the Bush regulation would have. But exactly what the DOL has in mind remains a mystery.
“We’re really in limbo until we get the new proposal,” said Jason Bortz, an ERISA attorney with the law firm Davis & Harman L.L.P.
The EBSA announced on Nov. 16 that it had postponed the effective date of the Bush administration investment advice proposal until May 17, 2010—the third such postponement since President Barack Obama took office. An official explanation of why EBSA changed from postponing the Bush regulation to canceling it was not available at press time.
Doug Halonen is a reporter for Pensions & Investments, a sister publication of Business Insurance.
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